Indiabulls Housing Finance Ltd intrinsic value for 2017 was Rs 816 per share

 

Indiabulls Housing Finance Ltd stock price are trading today at expensive valuations on the basis of its 2017 financial results. But investments are forward looking. So is Indiabulls Housing Finance Ltd stock price today are trading below its expected intrinsic value for 2018?

You will get the answer of that by the end of this article.

Indiabulls Housing Finance is one of our favourite stock and we included this stock in our previous year portfolio and also continue to hold this company stocks in our portfolio this year.

Let us have a quick glance on its Q4 2017 and full year results.

Indiabulls Housing Finance Q4 2017 and full year results

 

In the Q4 quarter Indiabulls Housing managed to generate Rs 2,931.40 crore from their operations and cost of their funds was Rs 1,739.10 crore. This means that gross income margin before operational expenses was 40.67%. They reported Net profit for the quarter Rs 840.53 crore reflecting net margin of 28.67%.

Last quarter at the time of demonetisation of notes they generated Rs 2,585.86 crore from their operations and cost of funding was Rs 1,632.88 crore and net profits from the operations was Rs 751.49 crore. This represents its net profit margin of 29%.

For the full financial year they generated Rs 10,399.04 crore and cost of fund was Rs 6410.78 crore. This means their gross margin was at 38%. They reported net profits of Rs 2,906.39 crore reflecting its net profit margins at 28%.

So this means that every Rs 100 generated from the operations, they made profits of Rs 28 for their shareholders. This sounds really great business. Isn’t it? They also have dividend policy where they pay Rs 9 per share every quarter as dividends to their shareholders. This means they pay half of their earnings as dividends and other half is reinvested in the business. A good sign of surplus cash flow.

Future expectations

 

The buy side analysts who follow this business are expecting its earnings to grow by more than 25% and the sell side analysts are expecting their earnings to grow by only 10% in the 2018 financial year.

The high realisation margin with strong growth in its earnings and rationale dividend policy makes it a sweet formula to give higher returns to their shareholders. Overall in today’s business condition this sector is the sweet spot for investors. It gets sweeter when you also get tax exemptions from these transactions.

Our quantitative tool tells us that it is trading within its intrinsic value band. Also its stock price is trading close to the lower band and you can invest 85% of your capital to your individual capital allocation. Well, this is just the guidance and not advise. You should do your own research and come to your conclusion.